Payroll services in Spain refer to all the services that can be offered by accountants or human resources specialists with regards to the payment of employees’ salaries. This service has to be concluded only by specialists who have an in-depth knowledge of the employment and tax legislations.
Our team of Spanish lawyers can also offer this service through the assistance of their accountant partners, if you opt to outsource payroll. Oursourcing payroll defines the action through which a company will not handle payroll in-house, but rather higher a specialist/a team of specialists.
What does payroll in Spain include?
There are 2 basic categories of payroll services a company can require:
- the management of paying employees, taking into consideration various parameters (bonuses, vacation days, the gross and the net salary, etc.);
- the taxation aspects deriving from employment contracts.
The payroll management can include the following:
- employment contracts – drafting and signing new contracts, the termination of contracts, etc.;
- preparing the payslips, based on which the employees will receive their salary;
- calculating the net salary that must be received by the employee.
In order to calculate the net salary of the employee, our lawyers in Spain will calculate the Spanish payroll taxes, which refer to the below mentioned elements:
- the income tax (calculated as a personal income tax);
- the health insurance contributions;
- the social security contributions.
What are the current rates for Spanish payroll taxes?
An important component of any business activity is its taxation. Spanish payroll taxes are a part of the corporate taxation that has to be submitted to the competent institutions by the representatives of the company.
In the following list, our Spanish law firm has prepared the main taxes and tax rates charged for payroll in Spain:
- Spanish employeesmust be paid on a monthly basis and this results in 12 salary payments, concluded in accordance with the date stipulated in the employment contract;
- provided that the company pays the employees later than stipulated in the contract, the calculation of the salary can include a 10% interest;
- personal income tax in Spain is charged based on a progressive system, from taxes ranging from 19% to 47%;
- the social security contribution is calculated for 2 entities – 1) the employer, who must pay approximately 31% and 2) the employee, charged with only 6%;
- there is also an unemployment contribution, that is paid at a rate of 5.5% by the employer and 1.55% by the employee.
Employers are legally required to withheld the necessary taxes from their employee’s salaries and to make payments no later than the 20th day of each month. The payments have to be made with the Ministry of Treasury.
Persons concluding the payroll services in Spain must complete the Form 111: IRPF Withholding at source and submit it in due time. The same obligation is imposed to those who develop a business activity as sole traders.
You can find out more information on the tax obligations of a Spanish sole trader from our team of lawyers in Spain.
Payroll in Spain can also include professional contingencies, which are charged to the employer; this can apply depending on the business activity developed by the company. Currently, the rates are of minimum 1.5% and maximum 7.15%.
For the year 2022, the maximum contribution that can be charged to an employee is of EUR 4,070.10 per month.
According to the Organization for Economic Cooperation and Development (OECD), Spain is on the 16th place from the 38 OECD member countries, when we refer to the value of employment taxes and contributions. Spain has been maintaining this position since 2020.
If you want to know more on the payroll services in Spain that can be provided by our team, please contact our Spanish law firm.